Navarro Knee-Jerk Shows How Sensitive Markets Are to Trade Talk

Global investors were taken on a roller-coaster ride Tuesday as a comment on U.S.-China trade from White House adviser Peter Navarro sowed confusion and sent assets whipsawing.

Risk assets slumped and havens jumped as traders appeared to take from a Navarro Fox News interview that January’s U.S.-China trade agreement was over. The moves reversed just as quickly after Navarro said the remark was taken “wildly” out of context and President Donald Trump later said deal is “fully intact.”

Here’s a look at what moved:

U.S. Assets

S&P 500 futures fell as much as 1.6% before recovering losses within an hour of the selloff. Treasury yields followed a similar pattern.

Volatility Futures

The Cboe Volatility Index, or VIX, was closed at the time of the comments — but its futures were active. July contracts on the “fear gauge” rose as much as 8.6% to 34.35 before falling back.

Asian Shares

The benchmark MSCI Asia Pacific Index briefly erased gains to fall as much as 0.6% before rebounding just as quickly. Regional markets across the region including Japan, Hong Kong, China, Taiwan and Korea all dipped negative before also recovering losses.

Currency Havens

Initial reports of Navarro’s comments sent currency traders rushing to havens, in the form of the yen and the dollar. The dollar-yen pair swung about 0.5%, a move matched by the Bloomberg Dollar Spot Index.

Asia Pacific FX

The Australian dollar also stumbledas much as 0.7% before resuming its earlier upward trajectory. The offshore yuan retreated.

Soft Commodities

Corn, soybeans and wheat futures traded in Chicago also swung on the trade concerns. November soybean contracts dropped as much as 1.6% before paring losses.

Cryptocurrencies

Even cryptocurrencies weren’t spared from the volatility. Bitcoin, which had traded close to $9,800 earlier in the day, briefly dropped as much as 0.4% to $9,610.

The market action “speaks in some way to limited liquidity and people striking first and asking questions later,” said Patrick Bennett, head of macro strategy for Asia at Canadian Imperial Bank of Commerce in Hong Kong. “It does indicate that the market remains very sensitive to U.S.-China tensions.”

— With assistance by Cormac Mullen, Ruth Carson, Lianting Tu, Joanna Ossinger, and Anna Kitanaka

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